Judge Mary H. Strobel, Case 21STCV42599 2022-07-25 Tentative Ruling

Hon. Mary H. Strobel

The clerk for Department 82 may be reached at (213) 893-0530.

Plaintiffs and Cross-Defendants Julie Park and Danny Chung (“Plaintiffs”) each move for a writ of attachment against Defendant NMSI, Inc. (“Defendant”) in the amount of $4,812,164.69.

In opposition, Defendant objects to Plaintiffs’ citation to the February 2, 2022 declaration. (Oppo. 9.) While the court does not endorse incorporation by reference of previously submitted materials, the evidentiary objection is overruled.

On November 18, 2021, Plaintiffs filed a complaint against Defendant NMSI Inc. and Jae Woong Chong for breach of contract and other claims.

On January 7, 2022, Plaintiffs filed a verified amended complaint for breach of contract and other claims (“FAC”).

On February 3, 2022, the court denied Plaintiffs’ ex parte application for a writ of attachment, without prejudice to Plaintiffs filing a noticed motion for writ of attachment. The court found no exigency.

On February 7, 2022, Defendant NMSI Inc. and Jae Woong Chong filed a cross-complaint against Plaintiffs for breach of fiduciary duty, breach of contract, and other claims. On that date, Defendants also filed an answer to the verified FAC.

On May 27, 2022, Plaintiffs filed the instant applications for writ of attachment. The court has received Defendant’s opposition and Plaintiffs’ reply.

“Upon the filing of the complaint or at any time thereafter, the plaintiff may apply pursuant to this article for a right to attach order and a writ of attachment by filing an application for the order and writ with the court in which the action is brought.” (CCP § 484.010.)

The application shall be executed under oath and must include: (1) a statement showing that the attachment is sought to secure the recovery on a claim upon which an attachment may be issued; (2) a statement of the amount to be secured by the attachment; (3) a statement that the attachment is not sought for a purpose other than the recovery on the claim upon which the attachment is based; (4) a statement that the applicant has no information or belief that the claim is discharged or that the prosecution of the action is stayed in a proceeding under the Bankruptcy Act (11 U.S.C. section 101 et seq.); and (5) a description of the property to be attached under the writ of attachment and a statement that the plaintiff is informed and believes that such property is subject to attachment. (CCP § 484.020.)

“The application [for a writ of attachment] shall be supported by an affidavit showing that the plaintiff on the facts presented would be entitled to a judgment on the claim upon which the attachment is based.” (CCP § 484.030.)

The Court shall issue a right to attach order if the Court finds all of the following:

(1) The claim upon which the attachment is based is one upon which an attachment may be issued.

(2) The plaintiff has established the probable validity of the claim upon which the attachment is based.

(3) The attachment is not sought for a purpose other than the recovery on the claim upon which the attachment is based.

“A claim has ‘probable validity’ where it is more likely than not that the plaintiff will obtain a judgment against the defendant on that claim.” (CCP § 481.190.)

“The Attachment Law statutes are subject to strict construction.” (Epstein v. Abrams (1997) 57 Cal.App.4th 1159, 1168.)

“In determining the probable validity of a claim where the defendant makes an appearance, the court must consider the relative merits of the positions of the respective parties and make a determination of the probable outcome of the litigation.” (Loeb & Loeb v. Beverly Glen Music, Inc. (1985) 166 Cal.App.3d 1110, 1120.) The court’s determination in an attachment proceeding “shall have no effect” on the main action. (CCP § 484.100.)

The application is based on Plaintiffs’ cause of action for breach of contract. To establish a claim for breach of contract, a plaintiff must prove: (1) existence of a contract; (2) plaintiff’s performance or excuse for nonperformance; (3) defendant’s breach of the contract; and (4) damages incurred by plaintiff as a result of the breach. (Durell v. Sharp Healthcare, (2010) 183 Cal.App.4th 1350, 1367.)

NMSI is a mortgage lender founded in 2008. (Chong Decl. ¶ 3.) Plaintiffs Julie Park (“Park”) and Danny Chung (“Chung”) are former branch managers of NMSI’s branch office located in Brea, California. (Verified FAC ¶¶ 29-30; Chong Decl. ¶ 4.)

In or about January 2019, Park and Chung executed a Branch Manager/Sales Manager Agreement with NMSI (“Agreement”). (Park Decl. file 2/2/22 (“1^st Park Decl.”) ¶ 9 and FAC Exh. 1, 2.) In the verified FAC, Plaintiffs allege that a similar agreement was previously executed in November 2018. (FAC ¶¶ 44-46.) The Agreement pertained to the Brea branch office and other branch offices in Virginia and Georgia. Under the Agreement, Plaintiffs were responsible for paying certain operating expenses of the branch offices. (FAC Exh. 1, 2.)

In the January 2019 Agreement, NMSI agreed to pay Plaintiffs pursuant to the following compensation structure set forth in Addendum A:

Following equation will be used to calculate the profit sharing plan with Branch Managers and Company.

· Danny Chung and Julie Park will not have to share branch revenue with company if and when total branch(s) net revenue is less than $90,000.00.

· When total branch(s) net revenue is Equal or greater than $90,000.00 – Danny Chung and Julie Park will share 25% of any and all net revenue greater than $40,000.00 with Company. Any and all commissions, incentive, overrides, and others pay to branch managers will not be separated and added and/or consider as other expenses. All these payments to branch managers will be included in $40,000.00. (Park Decl. ¶¶ 9-11; FAC Exh. 1, 2.)

As explained by Park: “In other words, Mr. Chung and I were entitled to receive $40,000 per month that was not subject to the profit sharing formula. Moreover, as long as the Brea branch generated at least $90,000 in a given month, NMSI was required to pay us 75% share of net revenues (i.e., net profits/net income), with NMSI keeping the remaining 25%.” (1^st Park Decl. ¶ 12.)

Significantly for this motion, the Agreement is integrated and includes the following provisions requiring modifications to be in writing:

24.5 Completeness and Modification. This Agreement constitutes the entire understanding between the parties hereto superseding all prior and contemporaneous agreements or understandings concerning the subject matter hereof and shall not be terminated, except in accordance with its terms, or amended, except in a writing executed by the parties hereto.

24.13 No Other Agreements. This Agreement terminates and supersedes all prior understandings or agreements on the subject matter hereof. This Agreement may be modified only by a further writing that is duly executed by both parties. (FAC Exh. 1.)

Plaintiffs contend that NMSI breached the “branch manager agreements beginning in January 2020 when it stopped using the express formula in their contracts to calculate their compensation.” (Mot. 2.) Plaintiffs contend that “the use of the improper formula resulted in NMSI improperly keeping an additional $4,911,050.052 in 2020, and an additional $1,770,100.83 in 2021—amounts that should have been paid to Ms. Park and Mr. Chung under their contracts.” (Mot. 2-3.)

Plaintiffs submit evidence to support these arguments. Specifically, in her February 2, 2022, declaration, Park declares that Defendant started using a new profit-sharing formula in January 2020 and continuing through 2021; that she never approved this new formula; and that the formula “deviated substantially from the express terms of our branch manager agreements with NMSI.” (1^st Park Decl. ¶ 18.) Chung also declares he did not agree to a modification. (Chung Decl. ¶ 6.) Plaintiffs submit evidence that neither Park nor Chung executed a formal written amendment of the January 2019 Agreement. (1^st Park Decl. ¶ 18; Chung Decl. ¶¶ 3-7.)

Plaintiffs also submit detailed calculations of damages under the January 2019 Agreement showing that Defendant underpaid Plaintiffs under the profit-sharing plan $4,911,050.052 for 2020, and $1,770,100.83 for 2021. (1^st Park Decl. ¶¶ 13-29, Exh. A-C.) As a comparison, Park submits calculations showing that Defendant paid the correct amount of compensation in 2019, “namely, the 75%/25% split of profits” in favor of Plaintiffs. (Id. ¶¶ 13-17, Exh. A.) In opposition, Defendant does not provide any responsive declarations about damages or argue that Park’s calculations of damages under the profit-sharing plan from the January 2019 Agreement are inaccurate. Given the level of detail provided and the lack of any opposing calculations, the court finds Park’s calculations in paragraphs 13-29 of her February 2 declaration to be credible and persuasive evidence under the probable validity standard.

Defendant contends that Plaintiffs do not establish a probably valid claim because the parties “modified” the January 2019 Agreement in October 2019. (Oppo.6-7.) Defendant does not develop an argument that the parties terminated the January 2019 Agreement and executed a new agreement in October 2019. Rather, Defendant’s opposition is based on an alleged “modification” of the Agreement. (Ibid.)

According to Jae Woong Chong (“Chong”), Chief Executive of NMSI, the terms of these modifications were discussed orally then described in a series of emails between Plaintiff Danny Chung and NMSI CEO Chong on October 22 and 23, 2019. (Chong Decl. ¶ 5.) Specifically, in an email dated October 22, 2019, between Jae Chong and Danny Chung, Chong summarized key points from the parties’ oral discussions, which included a 60:40 revenue sharing model as between NMSI corporate and the Brea branch, which was doing business as “Mortgage Mac.” (Id., Exh. A.) On October 23, 2019, Chung responded in Korean: “modu dongui-hamnida,” which in the Korean language translates to “All agreed.” (Id., ¶ 5, Exh A [certified translation].) Chong understood this statement to mean that everyone agreed to all those terms, including both Chung and Park. (Ibid.) Chong declares that “throughout the years Plaintiffs Chung and Park were employed with NMSI, it was common practice for Chung to communicate directly with me on all matters related to the operation of the Brea branch on both his and Park’s behalf.” (Id. ¶ 6.)

Plaintiffs contend that Defendant has mistranslated the October 23, 2019, email. Plaintiffs do not submit a certified translation of their own. (See Park Decl. filed 5/27/22 (“2nd Park Decl.”) ¶ 7; Chung Decl. ¶ 7.) However, Chung wrote the email in Korean and he declares that “the Korean phrase that I wrote (¿¿ ¿¿ ¿¿¿) means ‘everything agreed,’ and refers to the various items that Jae Chong and I had been discussing in our conversation.” (Chong Decl. ¶ 7.) The court also notes that the translation offered by Defendant – “all agreed” – could have various meanings and does not necessarily refer to a final agreement by Chung or Park.

Even accepting Defendant’s translation of the October 23 email, Defendant does not persuasively show, for purposes of this application, that Chung’s emails constituted “a writing executed by the parties” as required for a modification under sections 24.5 and 24.13 of the Agreement. Defendant contends that “[i]t is well-settled that parties can modify an otherwise ‘integrated’ contract via email.” However, Defendant does not discuss the California statutes and case law that govern execution of an agreement by electronic means. (See Oppo. 7, citing Stanley Works Isr. Ltd. v. 500 Grp., Inc. 332 F. Supp. 3d 488, 504 (D. Conn. 2018) [applying New York law].) The court finds the following guidance from the California Court of Appeal to be instructive:

Under UETA (§ 1633.1 et seq.), which became effective January 1, 2000, an electronic record satisfies the requirement that a record be in writing (§ 1633.7, subd. (c)), and an electronic signature satisfies the requirement that the writing be signed (§ 1633.7, subd. (d)). “An electronic record or electronic signature is attributable to a person if it was the act of the person. The act of the person may be shown in any manner....” (§ 1633.9, subd. (a); see Ni v. Slocum (2011) 196 Cal.App.4th 1636, 1647, [127 Cal.Rptr.3d 620] [“the *988 Legislature has, through these provisions, expressed general approval of the use of electronic signatures in commercial and governmental transactions...”].)

Section 1633.2, subdivision (h) defines an “ ‘[e]lectronic signature’ ” as “an electronic sound, symbol, or process attached to or logically associated with an electronic record and executed or adopted by a person with the intent to sign the electronic record.” UETA applies, however, only when the parties consent to conduct the transaction by electronic means. (§ 1633.5, subd. (b).) “Whether the parties agree to conduct a transaction by electronic means is determined from the context and surrounding circumstances, including the parties' conduct.” (Ibid.) “A party that agrees to conduct a transaction by electronic means may refuse to conduct other transactions by electronic means.” (§ 1633.5, subd. (c).)

Attributing the name on an e-mail to a particular person and determining that the printed name is “[t]he act of [this] person” is a necessary prerequisite but is insufficient, by itself, to establish that it is an “electronic signature.” (§ 1633.9, subd. (a).) As counsel and the court seemed unaware, UETA defines the term “electronic signature.” Subdivision (h) of section 1633.2 states that “ ‘[e]lectronic signature’ means an electronic sound, symbol, or process attached to or logically associated with an electronic record and executed or adopted by a person with the intent to sign the electronic record.” (Italics added; see CACI No. 380 [party suing to enforce an agreement formalized by electronic means must prove “based on the context and surrounding circumstances, including the conduct of the parties, that the parties agreed to use [e.g., e-mail] to formalize their agreement” (italics omitted)].)

(J.B.B. Investment Partners, Ltd. V. Fair (2014) 232 Cal.App.4th 974, 987-989.)

Defendant fails to address this California legal standard in its opposition and fails to show, with sufficient evidence, that Chung had intent to enter into a formal written modification of the January 2019 Agreement in sending the emails to Chong. The subject line of the emails is “What we have discussed yesterday.” (Chong Decl. Exh. A.) The body of the emails also appears to document a “discussion” or “thoughts” about a revised compensation structure. (Chong Decl. Exh. A.) In the October 23 email, Chung asked a follow-up question to Chong, which suggests that the parties were still discussing potential terms of a modification, not that they were executing a final modified agreement. (Ibid.) In his declaration, Chung explains the emails as follows:

In October 2019, Jae Chong and I exchanged emails regarding changes he insisted on making to our compensation structure. Although I indicated that I tentatively agreed with the broad terms outlined in Jae Chong’s email, it was my understanding that NMSI would be sending written agreements containing the exact details of the proposed modification, at which point Ms. Park and I would be able to negotiate further before signing the agreement. I never intended to waive the requirement in my branch manager agreement that any modifications to the agreed-upon terms be made only pursuant to an executed written agreement, nor did I ever sign anything in writing modifying my branch manager agreement. (Chung Decl. ¶ 6.)

Especially since this testimony corroborates the informal nature of the emails, the court finds it persuasive for purposes of this application. The court also considers that Chung did not insert an electronic signature or other symbol showing intent to sign a modified agreement by his email. (See Civ. Code § 1633.2(h).)

Under the probable validity standard, Defendant also fails to show, for this application, that Park executed a written modification of the January 2019 Agreement. Park was not a party to the October 2019 emails. Defendant’s evidence that Chung was authorized to enter into a modification for Park is disputed and not strong. Park declares that she “repeatedly informed Jae Chong that Mr. Chung was not authorized to negotiate on my behalf.” (2nd Park Decl. ¶ 8.) Defendant cites an August 2020, email in which Chong asserted his belief that Chung spoke on behalf of both himself and Park on matters related to the Brea branch (aka “Mortgage Mac”). (See Oppo. 4 and 2nd Park Decl., Exh. 3.) However, that email also shows Park stating that “I have an agreement with you, not him [Chung].” (Ibid.) Defendant submits no writing stating that Chung was Park’s authorized agent or could execute a modification or new agreement on her behalf. Having considered the relative merits of the parties’ positions, the court finds Plaintiffs’ evidence substantially stronger that Park did not authorize Chung to execute a modification on her behalf.

Defendant also contends that the parties modified the agreement by conduct. (Oppo. 6-7.) However, the only case Defendant cites for this proposition does not hold that an integrated agreement, which requires modification to be in writing, can be modified by conduct alone. (Oppo. 7, citing Diamond Woodworks, Inc. v. Argonaut Ins. Co. (2003) 109 Cal.App.4th 1020, 1056.) The Agreement contains an integration clause under which the “Agreement may be modified only by a further writing that is duly executed by both parties.” (see FAC Exh. 1 at ¶ 24.13.) That provision does not suggest that the Agreement could be modified by conduct.

Even if a modification to the Agreement could be made by conduct, Defendant fails to support the argument with sufficient evidence. Chong declares that “both Chung and Park personally supervised the calculations of the Brea branch profit and loss figures (‘P&L’), which reflected the modified profit-sharing model, which they then sent to and confirmed with NMSI’s accounting team.” (Chong Decl. ¶ 7 and Exh. B.) However, as argued in reply, the November 2020 email cited by Chong is incomplete evidence because “NMSI failed to include the attachment with the cover email.” (Reply 7.) On this evidentiary record, it cannot be determined from the November 2020 email what Plaintiffs were confirming. Furthermore, since the Agreement required modification by writing, Plaintiffs’ confirmation of the accuracy of the P&L Statements is insufficient to prove modification of the terms of the Agreement and the profit-sharing plan.

Defendant also cites to a June 2021 email of Plaintiff Chung which refers to a “40:60” split between “Mtg Mac” and NMSI. (See Chong Decl. ¶ 8, Exh. C.) This email post-dates Plaintiffs’ departure from NMSI. Park was not copied on this email. Defendant does not show that the June 2021 email constitutes a signed, written modification by Chung or Park.

In the opposition brief, Defendant also includes a single sentence stating, without analysis, “Additionally, there are substantial questions of contract interpretation, estoppel, waiver, ratification, and other legal questions concerning the modification of Plaintiffs’ agreements with NMSI.” (Oppo. 7.) Defendant does not elaborate or provide legal analysis in support of these additional legal theories. For purposes of this application only, the arguments were waived. (Nelson v. Avondale HOA (2009) 172 Cal.App.4th 857, 862-863 [argument waived if not raised or adequately briefed]; Pfeifer v. Countrywide Home Loans, Inc. (2012) 211 Cal.App.4th 1250, 1282 [court will not develop the parties’ arguments for them].)

On this record and briefing, Plaintiffs have the stronger position that the profit-sharing plan from the January 2019 Agreement was not modified. Having considered the relative merits of the parties’ positions, the court concludes that Plaintiffs have satisfied all elements of their contract claim, under the probable validity standard, that Defendant breached the profit-sharing plan in the January 2019 Agreement. Plaintiffs also submit undisputed evidence that they jointly suffered damages of $6,681,150.882 ($4,911,050.052 for 2020, and $1,770,100.83 for 2021.) (1^st Park Decl. ¶¶ 13-29, Exh. A-C.) Plaintiffs submit evidence that they split their profits evenly. (Chung Decl. ¶ 10.) Accordingly, Plaintiffs show probably valid contract claims in the amount of $3,340,575.44 each.

Plaintiffs further contend that, in addition to using the wrong profit-sharing formula, NMSI “failed to pay any share of certain streams of revenues, including profits generated from servicing approximately 160 KVOE loans …, profits generated from selling servicing rights to 471 loans to investors … , and outstanding reserve balances that should have been returned within 30 days after Ms. Park and Mr. Chung left NMSI.” (Mot. 3.)

Park declares, as follows: “Mortgage Servicing Rights or MSRs are the various rights associated with servicing a loan, including the right to collect borrower payments, issue monthly statements, manage escrow funds, cure defaults, foreclose, etc.” (2nd Park Decl. ¶ 12.) “When NMSI sold loans to investors other than Fannie Mae, the investors typically purchased the MSRs along with the loans. NMSI always included the total proceeds for those loan sales in calculating the Brea branch’s monthly revenues, and never sought to exclude any portion of the proceeds because the MSRs were included in the sale.” (Id. ¶ 14.) “Fannie Mae, however, has a well-established policy of not including the MSRs when purchasing loans, thereby requiring mortgage lenders to continue servicing the loans themselves unless they sell the MSRs to a third-party loan servicer.” (Id. ¶ 15.)

“On or about September 30, 2020, Fannie Mae purchased 471 loans from NMSI but did not purchase the separate MSRs. As a result, NMSI had to continue servicing the Fannie Mae loans for a short period of time until a third-party loan servicer purchased the MSRs.” (Id. ¶ 16.) “On or about November 2, 2020, pursuant to a deal I personally negotiated with Jae Chong’s express approval, NMSI entered into a purchase agreement with BSI Financial Services to purchase the MSRs for the 471 Fannie Mae loans for a fee of $218,251.92. A true and correct copy of the Purchase and Sale Letter Agreement between BSI Financial Services and NMSI is attached here to as Exhibit “1”.” (Id. ¶ 17.) “NMSI asserted that it was entitled to exclude the fees generated from that particular transaction—as well as the nominal amounts of interest collected by NMSI prior to the BSI sale—from the calculation of the Brea branch revenues.” (Id. ¶ 18.)

Applying the profit-sharing formula from the January 2019 Agreement, Plaintiffs calculate damages in the amount of $163,688.94 for their 75% share of this revenue. (1^st Park Decl. ¶¶ 36-38.)

Defendant fails to address this evidence in their discussion of the probable validity of Plaintiffs’ claim. (Oppo. 6-8; Sehulster Tunnels/Pre-Con v. Traylor Brothers, Inc. (2003) 111 Cal.App.4th 1328, 1345, fn. 16 [failure to address point is “equivalent to a concession”].)

In his opposing declaration, Chong declares that “Servicing fees-related issues are not part of the original agreement or the modified profit-sharing plan, and they were never included in the P&L calculations used to calculate Plaintiffs’ income.” (Chong Decl. ¶ 9.) However, Park declared that Defendant always included in Plaintiffs’ compensation the revenues from MSRs sold to investors other than Fannie Mae. Chong does not rebut that evidence.

Chong suggests that these servicing-related fees do not fall within the definition of compensation in the Agreement. (Chong Decl. ¶ 9.) The point is not fully developed by Defendant. Revenue is defined broadly to include: “any other fees charged to the borrower,” “Net Premiums gained by sale of branch loans to the secondary market,” and “Any net revenue gained on Lender’s Fee.” (FAC Exh. 1, ¶ 4.2.) The profit-sharing plan is based on revenue. (Addendum A.) Subject to argument, the court concludes that Plaintiffs have the stronger position that these servicing related profits are part of their agreed-upon compensation.

Plaintiffs show a probably valid claim as to the $163,688.94 in profits not paid for MSR sale proceeds.

Park declares, as follows: “After NMSI originates and closes a loan, it is entitled to collect interest from the borrower for the short period that the loan remains on NMSI’s books before it is sold to an investor on the secondary market. Those servicing revenues were generally limited to only a few weeks’ worth of mortgage interest covered by the borrower’s first payment. Prior to the KVOE loans, the nominal amounts of interest collected by NMSI were always included in its calculation of branch revenues.” (2nd Park Decl. ¶ 20.) “When NMSI could not offload its loans on the secondary market for several months in 2020 due to a freeze of the secondary market caused by the COVID-19 pandemic, however, NMSI began receiving significantly larger amounts in interest payments, especially for the KVOE loans originated by the Brea branch.” (Id. ¶ 22.) “Despite having always included the interest payments for the loans that it held for only a short period in calculating the Brea branch’s revenues, with respect to the larger interest payments collected for the KVOE loans, NMSI excluded the interest payments that it collected from the KVOE loans from the calculation of the Brea branch revenue.” (Id. ¶ 23.)

In her first declaration, Park calculated damages as follows: “Attached hereto as Exhibit “D”, is a true and correct excerpt of a report generated by NMSI and sent to me by an authorized NMSI employee as an attachment to an email dated July 9, 2021…. Exhibit D shows that NMSI has received at least $3,242,296.32 in servicing revenues from the 160 KVOE loans. Because those loans were originated by the Brea branch and the servicing revenues collected by NMSI constitutes net revenues earned on those loans, under the express terms of the branch manager agreements, NMSI was required to pay us a portion of the amounts it received when the KVOE loans were sold to third party investors…. Exhibit D shows that NMSI has received at least $3,242,296.32 in servicing revenues from the 160 KVOE loans. Because those loans were originated by the Brea branch and the servicing revenues collected by NMSI constitutes net revenues earned on those loans, under the express terms of the branch manager agreements, NMSI was required to pay us a portion of the amounts it received when the KVOE loans were sold to third party investors.” (1^st Park Decl. ¶¶ 32-34.)

In opposition, Chong declares as follows: “When KVOE loans are paid off from the warehouse banks (the initial source of funding for those loans), it is considered that loans have been sold. Therefore, any revenue or loss generated by getting KVOE loans into what is called the “Gestation Line” (a secondary credit facility used to provide funds to pay off the initial funds providers) have been accounted for already in the P&L calculations related to Plaintiffs’ profit-sharing plan. Plaintiffs therefore would not be entitled to further income related to any subsequent servicing activities from those loans, even if their agreements allowed them to collect servicing income—which they do not. The P&L for those loans already was accounted for.” (Chong Decl. ¶ 10.)

In reply, Plaintiffs contend that Chong’s declaration lacks “evidentiary or legal support,” but they do not submit a reply declaration responding to his point. (Reply 10, fn. 4.)

The court finds a material disputed issue as to Plaintiffs’ right to compensation for servicing KVOE loans. The court finds it significant that Plaintiffs do not offer a counter-declaration in response to Chong’s testimony that revenues from KVOE loans should already be accounted for. Plaintiffs also rely on Exhibit D to the first Park declaration without any explanation of how this spreadsheet was prepared. (1^st Park Decl. ¶¶ 32-34.) On this record, while they have some relevant evidence, Plaintiffs do not sufficiently show a probably valid claim related to compensation for servicing KVOE loans.

As argued in the motion, section 4.9 of the January 2019 Agreement states that ““[Plaintiff] shall be paid . . . any remaining balance in the branch account, including outstanding branch reserves, within 30 days after termination of this agreement.” (Mot. 10, citing FAC Exh. 1.) Plaintiffs submit evidence, based on Defendant’s 2021 P&L Statement, that outstanding reserves totaled $463,689.78 and Defendant never paid Plaintiffs their 75% share of that amount, based on the profit-sharing formula in the Agreement. (1^st Park Decl. ¶¶ 39-42.) In opposition, Defendant does not respond at all to this evidence. (Sehulster Tunnels/Pre-Con v. Traylor Brothers, Inc. (2003) 111 Cal.App.4th 1328, 1345, fn. 16 [failure to address point is “equivalent to a concession”].) Plaintiffs show a probably valid claim for non-payment of the 75% share of outstanding return balances in the amount of $347,767.33.

Based on the foregoing, Plaintiffs submit evidence that they jointly suffered damages of $7,192,607.12 ($6,681,150.882 + $347,767.33 + $163,688.94.)[1] Plaintiffs submit evidence that they split their profits evenly. (Chung Decl. ¶ 10.) Accordingly, Plaintiffs show probably valid contract claims in the amount of $3,596,303.58 each.

“[A]n attachment may be issued only in an action on a claim or claims for money, each of which is based upon a contract, express or implied, where the total amount of the claim or claims is a fixed or readily ascertainable amount not less than five hundred dollars ($500) exclusive of costs, interest, and attorney's fees.” (CCP § 483.010(a).) “An attachment may not be issued on a claim which is secured by any interest in real property arising from agreement ….” (CCP § 483.010(b).)

Plaintiffs’ application for writ of attachment is based on a contract where the total amount allegedly due is in excess of $500. It does not appear this contract claim is secured by real property.

Defendant contends that Plaintiffs’ contract claim is not fixed or readily ascertainable. (Oppo. 8-9.) The court agrees only in part. “It is a well-recognized rule of law in this state that an attachment will lie upon a cause of action for damages for a breach of contract where the damages are readily ascertainable by reference to the contract and the basis of the computation of damages appears to be reasonable and definite. [Citations.] The fact that the damages are unliquidated is not determinative. [Citations.] But the contract sued on must furnish a standard by which the amount due may be clearly ascertained and there must exist a basis upon which the damages can be determined by proof.’ ” (See CIT Group/Equipment Financing, Inc. v. Super DVD, Inc. (2004) 115 Cal.App. 4th 537, 541.)

Here, as discussed above, the January 2019 Agreement provides a specific formula for determining the profits owed to Plaintiffs. Plaintiffs submit evidence that the parties indeed calculated the profits owed under this formula in 2019. (1^st Park Decl. ¶¶ 13-17.) Plaintiffs also submit calculations, using that same formula and the revenue data already included in the 2020-2021 P&L Statements, that Defendant underpaid Plaintiffs by $3,340,575.44 each. (Id. ¶¶ 13-29, Exh. A-C.) Defendant has not materially disputed or challenged those calculations.

Defendant states that “Plaintiffs also now dispute the basic elements of those calculations (for example, whether servicing fees should be included), despite numerous instances where Plaintiffs confirmed that those inputs were correct.” (Oppo. 9.) For the profit-sharing damages discussed in paragraphs 13-29 of Park’s first declaration, no additional information is needed for the calculation of damages. Rather, Park simply changed the calculations in the P&L Statements to reflect the profit-sharing formula in the 2019 Agreement. Thus, the damages for breach of the profit-sharing formula are fixed and readily ascertainable from the January 2019 Agreement and Plaintiffs’ declarations and exhibits.

For the reasons discussed above, there is a material disputed issue as to Plaintiffs’ right to compensation for servicing KVOE loans. Plaintiffs do not offer a counter-declaration in response to Chong’s testimony that revenues from KVOE loans should already be accounted for. Plaintiffs also rely on Exhibit D to the first Park declaration without any explanation of how this spreadsheet was prepared. (1^st Park Decl. ¶¶ 32-34.) While it seems possible that these alleged profits could be calculated based on the parties’ Agreement, the court cannot determine on this record whether that will be the case. These alleged damages are not fixed and readily ascertainable on this record.

These items of damages are fixed and readily ascertainable from the January 2019 Agreement and Park’s declarations and exhibits. Defendants have not materially disputed the calculations of damages offered by Park. These damages are fixed and readily ascertainable.

Code of Civil Procedure section 484.090 states that the Court shall issue a right to attach order if “the attachment is not sought for a purpose other than the recovery on the claim upon which the attachment is based . . . [and] the amount to be secured by the attachment is greater than zero.”

Plaintiff declares, and the court finds, that attachment is not sought for a purpose other than the recovery on Plaintiff’s claim. (Appl. ¶ 4.) The amount to be secured is greater than zero.

Code of Civil Procedure section 487.010(a) provides that “[w]here the defendant is a corporation, all corporate property for which a method of levy is provided” is subject to attachment. Thus, a request for attachment of all of Defendant’s property is appropriate.

Defendant contends that any attachment granted to Plaintiffs should be reduced “based on their own breaches of contract and tortious behavior,” as alleged in the cross-complaint. Defendant states that “those [cross-]claims are not specifically at issue in this Application, but they provide further context for this Court when considering whether Plaintiffs can prove their claims with reasonable certainty under the probable validity standard.” (Oppo. 10.)

Code of Civil Procedure section 483.015(b) provides that the amount to be secured by the attachment shall be reduced by, inter alia: “(2) The amount of any indebtedness of the plaintiff that the defendant has claimed in a cross-complaint filed in the action if the defendant’s claim is one upon which an attachment could be issued.”

“[T]o sustain reduction in a writ amount, most courts require that the defendant provide enough evidence about its counterclaims and/or defenses to prove a prima facie case [for attachment against Plaintiff].” (Ahart, California Practice Guide: Enforcing Judgments and Debts, ¶ 4:64 (1998 rev.).) Defendant has the burden of proof to satisfy the requirements of attachment for any offset claim. (See CCP § 483.015 and Lydig Construction, Inc. v. Martinez Steel Corp. (2015) 234 Cal.App.4th 937, 945.)

Here, while Defendant presents some evidence related to its cross-claims, it does not address all requirements of attachment, including whether the cross-claims are “based upon a contract, express or implied, where the total amount of the claim or claims is a fixed or readily ascertainable.” (CCP § 483.010(b).) Defendant also does not discuss or submit evidence supporting all elements of their cross-claims, including damages. Indeed, Defendant does not specify any specific amount of damages in the opposition or Chong declaration. (Oppo. 10-12; Chong Decl. ¶¶ 10-17.) The cross-complaint is not verified and, in any event, does not specify damages.

Based on the foregoing, Defendant does not establish all elements of attachment for any cross-claim, including any specific amount of damages. Accordingly, Defendant does not show any basis to reduce any attachment issued to Plaintiffs.

Code of Civil Procedure section 489.210 requires the plaintiff to file an undertaking before issuance of a writ of attachment. Code of Civil Procedure section 489.220 provides, with exceptions, for an undertaking in the amount of $10,000.

Defendant does not submit any evidence to support a finding that probable recovery for wrongful attachment exceeds $10,000. (See Oppo. 12-13.) Chong states, generically, that “NMSI is a lender with extensive credit agreements with warehouse lenders and other parties” and “an attachment lien could impact NMSI’s creditworthiness with those warehouse lenders, which could cause them to restrict further extensions of credit.” (Chong Decl. ¶ 17.) This evidence is too conclusory for the court to find that probable recovery for wrongful attachment would exceed $10,000 or for the court to impose an undertaking in any specific amount greater than $10,000.

The applications for writ of attachment are GRANTED in the reduced amount of $3,596,303.58 for each Plaintiff.

[1] Because this amount is less than the $9,563,684 pleaded in the complaint, it is irrelevant that the complaint pleads a slightly lower amount of damages than stated in the motion. (Oppo. 9.)